Last week's OECD report into New Zealand's economy may have appeared a dry and remote treatise on how to increase growth and reduce poverty, but it was anything but.

At its heart, it detailed how a small group of well connected and extraordinarily wealthy property owners on a small isthmus of land between Auckland's CBD and Mangere Bridge were effectively holding New Zealand's economy hostage and entrenching hundreds of thousands of children in the sort of poverty that kills them in winter and costs taxpayers throughout the country billions each year.

The OECD report included a range of suggestions about how to "make economic growth inclusive" and "remove bottlenecks to sustain economic expansion," but the most explosive one was around the need to increase the intensity of housing on the isthmus of Auckland.

It recommended the Government work with Council to try to convince land owners to allow more dense housing developments around the likes of Ponsonby, Grey Lynn, Mt Eden, Remuera, Parnell and Epsom. And if they don't, it suggested the central Government intervene in some way to force them to do it.

"As a large share of planned residential development in Auckland is to continue to occur within previous city limits, it will be important to find ways to increase community support for densification," the OECD.

"A greater central role in dealing with local objections might take some pressure off municipal governments," it suggested.

There are a range of blockages to more dense development on the isthmus, including new heritage overlays stopping the redevelopment of land occupied by pre-1944 homes, restrictions on the height of apartments and on developments within 'view shafts' that fan out from the myriad of volcanic cones in Auckland/

They have been inserted into Auckland's planning rules since the late 1970s and include the watering down of an attempt through the Proposed Auckland Unitary Plan to allow more dense developments.

The political heat from home owners centred around the Auckland 2040 lobby group was so great in mid 2013 that Mayor Len Brown and the Auckland Council were forced to gut the densification provisions in the draft Unitary Plan. Council insiders describe how the lawyers and professionals in the leafy suburbs mobilised quickly to fire off submissions and lobby their local boards and councillors. Within days of the launch of the draft plan, the letters to the editor and the Facebook groups were cranked into action and a concerted media campaign killed the measures to increase density.

But the successful lobbying by a few has had an enormous cost. Auckland house prices have risen 35% since that mid-2013 revolt against densification. The OECD showed how projected housing demand in Auckland was now growing at double the pace of recent building consent issuance and the housing shortage has grown to as many as 30,000.

Auckland's high housing costs were a major reason why around 20% of children in New Zealand were living in material hardship, the OECD pointed out. Recent deaths from respiratory illnesses caused by living in leaky, cold and damp homes in Auckland illustrate the scale and the desperation of the problem. Simply building houses on the fringes of Auckland does not solve the problem as increases transport costs for the poor and congestion for the rest. High quality and affordable housing, which means townhouses and apartments, are needed close to the centre of Auckland.

So what could be done? The OECD said the Government could use its existing RMA powers to recommend Council allow more density. The Unitary plan is also not a done deal, with hearings now going on before the Independent Hearings Panel. That will be one venue to encourage more density.

"These regulations, including the Resource Management Act are highly devolved, so more central guidance would be beneficial to ensure consistency with environmental goals, as well as to reduce scope for vested interests to limit competition or thwart rezoning and development that would be in the wider public interest," the OECD said.

But before the iron fist of central Government comes crashing down, it would make a lot more sense for all and sundry to sit down and explain the costs of blocking densification to the opponents, and the potential opportunities if they relent.

Accords seem to be all the rage at the moment. The Government came to a Housing Accord with the Auckland Council to create Special Housing Areas and puncture holes in the old Metropolitan Urban Limit, which allowed Auckland to grow 'out'. There is even talk of a Transport Accord to jointly provide the roads and buses and trains needed to allow all those new residents on the fringes to move around.

Now Auckland needs to grow 'up' and it needs political leadership from the likes of John Key, Bill English, Nick Smith, Len Brown and Penny Hulse to convince those on the isthmus to embrace and encourage that growth.

Such a Densification Accord could help take some of the political heat out of the issue, or at least put an intense national spotlight on those who are blocking development for their own reasons. It may also help show those hold outs that change could not only be good for the nation, but very profitable for them. As Westpac Chief Economist Dominick Stephens has pointed out, increased freedom to develop land more densely simply increases the value of that land.

Ultimately, that argument may be the most potent in any Densification Accord because it appeals to the ultimate motivation in New Zealand -- untaxed capital gains from rising land values.

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A version of this article has also appeared in the Herald on Sunday. It is here with permission.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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31 Comments

2011
The Alpers Ave Redevelopment Group
Is looking forward to tomorrow morning’s opening by the Prime Minister and the Building & Construction Minister of Stage One of the $70 million Alpers Ave Redevelopment Project. Over the next three years, the Alpers Ave Redevelopment Project will transform the southern end of Newmarket, New Zealand’s premier retail district, around the site of the old Carlton Bowling Club. The project, which is the brainchild of Remuera businessman Donghua Liu, will involve the development of open spaces, high-value residential apartments, education facilities and a new five-star hotel.http://auckland.scoop.co.nz/2011/09/pm-to-open-stage-one-of-70-million-p...

"Loan-to-income restrictions could potentially have a huge dampening effect on the Auckland market... rules will be beefed up in October, with Auckland investors required to hold a 30 per cent deposit. But a note buried in a policy document explaining the rules reveals New Zealand's central bank is gathering information on borrowers' loan to income ratios, following restrictions imposed by central banks in England and Ireland.....With median household incomes in Auckland around $75,000, that (ratio of 4.5 would) prevent most house hunters from borrowing more than $338,000. Adding a 20 per cent deposit would take the sum to $422,000, which would still be nowhere near the median house price of $749,000."http://www.stuff.co.nz/business/money/69261592/home-loans-to-be-capped-b...

And Ireland may be 'recovering' with " In 2014 prices surged 16 percent across Ireland" but their Graeme Wheeler hasn't forgotten " just six years after home values started plunging...the new rules will cap most loans at 80 percent, and 3.5 times a borrower’s pretax income...Prices are still 38 percent below their 2007 peak." So here we have a country that sees what damage a property market can to to it, and with prices nowhere near where they were, they're putting a stop to it.http://www.bloomberg.com/news/articles/2015-01-30/irish-bank-slows-best-...

If they're looking at putting in high density housing I hope they have built the subway first because all existing examples of high density housing show the need for well developed commuter systems, and it'll be much more cost effective to build the underground services before putting buildings on top of them.

Aucklanders living in their homes refusing to move out so masses of migrants can replace them in vertical ghettos?

And the ones causing the injustice are the long time residents??

Auckland is full. It is a fact. Get over it and stop the nonsense talk of every expanding population.

Considering that a $2m Grey Lynn home sits on perhaps 400m2 and that even in the most dense of housing (which doesn't include vertical towers, 200m2 per family size unit is all that can be achieved, then how does bulldozing a $2m house to create two $1m+ development sites, make housing affordable?? In fact it will make it more expensive.

Ponsonby, Grey Lynn etc are already incredibly dense. Only vertical apartments would actually increase the density greatly. These could be accommodated on commercial land and in pockets, but the reality is that those types of homes aren't wanted and supply of them will do nothing to alter the demand for detached homes with a lawn.

Auckland has 3 possible solutions:

1. Stop Immigration

2. Create satellite cities

3. Or just create one big ghetto and jam pack everyone in until it is so undesirable everyone else decides to leave.

option 1 wont happen as that is the only thing keeping the economy going, the problem with it is infrastructure spend is not keeping track,
option 2
would require the government spend on cheap efficient fast rail, not going to happen
option 3 unlikely if you have people moving from cities with 20 mil+ Auckland seems a city of huge space and unpopulated.

That idea has been running around here on interest.co.nz for years and will keep on supplying fuel to the fire until one day, meaningful data is made available that demonstrates what benefit is being achieved by 100,000 pa inbound migrants coming into the country. Data in the form of increased productivity, increased GDP per capita, and how does concentrating all that inflow into Auckland benefit the rest of the country

Or, is there a dis-benefit to Auckland which in turn sucks the life-blood out of the regions?

Odd thing is, BH prowls around the corridors of power, fraternising with the political elites, blowing in his ears, which is dutifully reported on HiveNews .... but you know what is missing ... ?

"Ponsonby, Grey Lynn etc are already incredibly dense" - and they are some of the best and most sought after areas in Auckland. People like them because they aren't boring suburbs with nothing to do and no community.
Maybe if we make some more 'incredibly dense' areas Auckland will be a better place!

In Hickeys article it starts out saying that land is too expensive but then it goes on to say that the rules should be changed so that intense development can occur.
If so land prices will skyrocket overnight. How does this make housing cheaper?
Sure, in about 5 years, there may be some small number of additional new apartments built that wouldn't have been built otherwise. Will they be cheap? Nope. Will the neighbours be happy? Nope.
Personally I actually hope that interest rates increase so that this madness can go into reverse gear.

If the "reality" is that apartments aren't wanted. How come there are so many being built and most of them sell out well before they are built?

Looks at the building consent data for auckland single house vs terraced housing and appartments. ALL the growth in permits since the GFC has been in appartments. People simply don't want a single house on the outskirts like they used to. The outskirts are now so much further away from the centre and the traffic is so much worse.

The Metropolis - 2007
Some years ago a group of people sat discussing the concept of modern life. They spoke about international cities, of its buildings and of the service. Soon, a strategic parcel of land became available in the heart of Auckland city. Developers, architects, lawyers, designers, agents and financiers exchanged phone calls and faxes. Meetings were held, handshakes were made and contracts confirmed. And, as the ink of the signatures dried and champagne popped, the concept began which we now know as “Metropolis”. It was a dream come true for Mr. Andrew Krukziener, the Governing director of Krukziener Properties to whom the credit of developing the Metropolis goes to.http://www.metropolisresidences.com/thebuilding.html

Option 1 will not happen as it will kill off the economic stats and then the economy. Option 2 is the one they should consider for the sake of quality of life in Auckland however, being political, option 3 will occur as doing nothing has less short term political risk.

Can't see that a lower level of immigration would be a negative for the economy, certainly not GDP per capita which is the only realistic way to look at it. A huge chunk of the recent immigrant cohort is low quality - a lot of elderly family repatriation plus rocket scientist taxi drivers and$2 dollar shop operators with a fair few fraudsters, prostitutes and general low lifes for good measure. Unfortunately, in the absence of any useful statistics, that's just anecdotal but interesting to talk to some of the immigrants. They are telling me the same thing; less immigration and they certainly don't want NZ to turn into little Shanghai or Kolkata or a North England slum either.
Of course Government are not the least bit interested in what they or you and I think; if big business say they are having any difficulty finding staff at minimum wage JK & Co will oblige with another thousand a week.

you are correct on immigration and big business, I get sick of seeing complaints from them in the papers about not being able to bring workers in. trying paying a decent wage and training people already here especially our youth.

so the English speaking students whether they be immigrants or not will be disadvantaged as the teacher has to spend extra time and effort on the non English speaking children. it its one or two a class that's ok but 40% that's way to many.

In the interview, the principal, was most careful and diplomatic in his choice of words

But he did get the message across

While there is obvious disruption, he was more concerned at the overt aggression towards female teachers by the afghani male pupils and their fathers, which would be disruptive x 3.
That's their culture.
Listen to the interview again

a indian friend told me five or six years ago NZ was making a huge mistake letting in a certain religion and the followers from certain countries, he said we are importing a problem and when I now look at aussie I see what he means.
I get your point on the males I work past an certain religious high school on the way to work and have seen that attitude first hand

yes seldom is it the people that are the problem, but cultural baggage that they bring with them - and it is hard for those who just shift without becoming part of their new community, instead holding fast to ideas and values that didn't work well at home (hence them leaving).
Same thing goes for the French settlers in NZ and the English who wanted to make the new country an "England in the South". Even the Maori went back for kumera and had to adapt to the new environment when they landed. Simply you can't create a better place if you're building to the rules of your last place - whether cultural, country or business.

I object to intensification on the grounds of quality not quantity. There are hundreds of examples of bad rubbishy cross leasing and shoddy leaking houses across Auckland. There are still too many cowboys out to make a fast buck to allow the gates open too wide.NIMBY until the quality improves !!

the whole building a second home on the back half of sections is a stupid idea. they need to look at allowing apartments (decent ones) to be built all over Auckland no restrictions. im sure if you built them along the coast like the gold coast they would sell ok also if they built them by the airport they would sell.

"Nzers don't want appartments" - well no worries about changing the zoning then, developers won't build em if no one wants em
"High density slums" - I can't think of many examples of that in Auckland, most of the higher density areas are the best areas like ponsonby. I can think of lots of low density sprawl slums though.
"Appartments were built badly in the 90s and 00s" - so we're a lot of houses
"Just stop immigration" - most of aucklands predicted growth is from natural increase and internal migration not immigration.
"I don't want an apartment next door to me" - there's lots of things I don't want too but you need to buy the land next door to have a say in what it is used for.
"I don't want to live in high density" - no one is saying all of Auckland needs to be high density, just a few suburbs close to the city.
"Just build satellite towns" - what incentive would any business have to be located there? They will just end up causing even more congestion.

The OECD report doesn't detail anything of the sort. Bernard has joined the various dots together himself

These reports are very useful as a way of tracking the "State of the Nation" over time but, after reading the relevant section of the full report (agreed, Bernard, dry as dust) I would caution anyone to take their policy prescriptions with a grain of salt.

They appear to have cherry-picked whatever locally produced analysis and policy recommendations fit into their own preferred framework and trotted them out. What is missing from this debate is some sort of genuine analysis of options. The OECD jump straight to densification as though that is the only way Auckland can go. Pretty much everything else in that section is built on that one assumption.

If we are concerned about issues like poverty caused or exacerbated by excessive accommodation costs then my challenge to the OECD and Bernard is to produce evidence of one city anywhere in the world where forced densification combined with limits on outwards expansion have solved that problem.

Agree. Densification has merits in the Singapores and HK's of the world, to be sure. But just look at the style of Gubmint it took to do that there Densifyerating.

A thought experiment (the safest kind) to pose an alternative to D'ing Awkland:
- a satellite city, with motorway and rail links plus an inland port
- established industry so all a them NIMBY's have no leg to stand on when new ones are plonked there
- established worker suburbs to supply all a them Woikers for aforesaid Industries
- tertiary education to credentialise all a them Woikers so they can wipe their noses in an Approved Manner and to Appropriate Standards
- shops, hospo, stadia, InterWebs via cable, to Entertain (and control) all a them Woikers in their pitifully few Leisure Hours
- surrounded by lifestyle blocks (the pony and thistle producers of this fair land) ripe for the D word, and with owners (who have twigged to the fact that these are Life Sentence Blocks) desperate to go anywhere else.
- living costs demonstrably lesser than Awkland's
- not stuck on a geographical choke-point or at the ass-end of some country gravelled road